Ex-Leader's Death Shakes Argentina

In Buenos Aires in June 2008, Argentine President Cristina Kirchner and husband Néstor celebrate a victory in a conflict with farmers.
Agence France-Presse/Getty Images

By

Matt Moffett and

John Lyons

Updated Oct. 28, 2010 12:01 a.m. ET

BUENOS AIRES—The death of Argentina's ex-president Néstor Kirchner, seen by many as the power behind his wife's government, creates vast political uncertainties but also opens the possibility that the country could shift away from its combative populist policies.

Mr. Kirchner, 60, died early Wednesday of a heart attack while visiting the southern city of El Calafate with his wife, President Cristina Kirchner. The fiery former governor served as president between 2003 and 2007, and was widely expected to seek another term in October 2011 in a strategy to alternate presidencies with his wife.

News of the death brought a mixture of sorrow and anxiety to Buenos Aires, unusually quiet as locals awaited the rounds of the official census. "I was shaken up," said Beatriz Menéndez, a 60-year-old businesswoman who lives in the fashionable Palermo neighborhood. "His death generates instability."

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Néstor Kirchner
Zumapress

But Argentine asset prices surged Wednesday on investors' optimism that Mr. Kirchner's passing will pave the way for the country to shift to more market-friendly policies.

In the seven years in which one of the Kirchners have governed Argentina, the country emerged from its crushing 2001 financial collapse to become one of the world's fastest-growing economies. But in the process, Mr. Kirchner amassed a long list of critics by expanding the state's role in the economy, running roughshod over institutions, and shifting Argentina from friend of the U.S. to ally of Venezuela's Hugo Chávez.

Former Argentine President Nestor Kirchner is honored with a Catholic Mass, and huge crowds leave flowers and messages at Argentina's government house.

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Argentina, once a leader among emerging nations, turned inward as its ruling couple were consumed by political battles. Relations with neighbors like Uruguay and Brazil were marked by commercial squabbles. Argentina, once the issuer of a quarter of all emerging-market debt, has been essentially shut out of international financial markets since 2001, when it committed the world's biggest sovereign-debt default, on $95 billion of bonds.

Argentina's declining global role is a sharp contrast to the rise of Brazil. The Latin giant grabbed a leadership role in the region and, as its economy grew, became a global voice for the developing world in international forums such as the Group of 20.

Mr. Kirchner—a product of the "Peronist" political movement founded by the populist Juan Perón in the 1940s—will be remembered as a shrewd and pragmatic political operator who managed to hold on to power during a tumultuous stretch in Argentine politics.

By many estimates, the lanky politician, who often favored brown leather jackets over business suits, thrived on the tumult. Soon after coming to power in 2003, he expanded his support base and popularity by confronting the military over crimes committed during a dictatorship more than two decades earlier.

End of an Era: Néstor Kirchner's life in politics

1950: Néstor Kirchner is born in Río Gallegos, in the Patagonian province of Santa Cruz, Argentina.

1970s: Studies law at National University of La Plata; marries Cristina Fernández.

1976–83: Active in opposition politics during military dictatorship for belonging to the opposition, he is briefly imprisoned.

2003: Becomes president. Enables prosecution of military officers for human-rights abuses committed during the dictatorship; oversees negotiations with foreign creditors that leave them with about 30 cents on the dollar.

2007: His administration is plagued in its later years by corruption scandals, energy shortages that trigger rolling blackouts in Buenos Aires, and high inflation, due in part to the devaluation of the peso.

2007: Cristina Kirchner succeeds her husband as president of Argentina.

2009: Mr. Kirchner, now head of the Peronist party, runs for a seat in the lower house of Congress; he wins, but his slate finishes second to a rival faction.

Oct. 27, 2010: Elected secretary-general of Unasur, a group promoting regional integration in South America. Dies of a heart attack.

—Source: WSJ research

He was a harsh critic of the International Monetary Fund, and sealed a reputation as a stubborn negotiator by forcing international investors to take a steep loss in an abrasive 2005 restructuring of much of Argentina's defaulted bonds.

The Kirchners' husband-and-wife governance was reminiscent of the way Mr. Perón worked with his second wife, Eva, to build support among the poor.

For the 57-year-old Mrs. Kirchner, her husband's death creates what Argentine pollster Mariel Fornoni calls a "test of fire." Though a long-time politician herself, she counted on Mr. Kirchner to handle the day-to-day horse-trading that is vital in Argentina's patronage-driven Peronist system.

In the short run, Mrs. Kirchner is likely to receive an enormous outpouring of sympathy for her loss. Whether she manages to maintain popularity and launch a presidential run next year is an open question.

"One worry for her is that since Nestor was the political operator, what happens if the Peronists start smelling weakness and indecisiveness?" said Rice University political scientist Mark Jones.

Mrs. Kirchner was thought to be more pragmatic than her husband when she took office in December 2007. But Argentina has seen more state intervention and political conflict during her presidency than in her husband's. There's plenty of debate about how much of that was due to Mr. Kirchner's influence and how much—if any—moderation can be expected from Mrs. Kirchner operating solo.

"There is an opportunity to change the politics, but my own sense is that's unlikely," said Michael Shifter, president of the Inter-American Dialogue, a Washington think tank. "It might be wishful thinking to think that that will change now. I am not sure reaching out and engaging more broadly is part of her political makeup."

Just a few months after she came into office, Mrs. Kirchner became embroiled in a battle with farmers over an export-tax increase, which coupled with the global recession, sapped much of her support. The Kirchners had enjoyed a resurgence of sorts over the past year thanks to the economy's fast growth and missteps by their political foes.

If Mrs. Kirchner begins to lose control, one name to watch, political analysts say, is Buenos Aires Province governor Daniel Scioli. He has remained loyal to the Kirchners while maintaining ties to farmers and parts of the private sector that the Kirchners have alienated. He could emerge as a consensus candidate to unite pro-Kirchner and dissident Peronist factions, analysts say.

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A sign at the government palace on Wednesday says 'Thanks Néstor.'
Associated Press

But the demise of Mr. Kirchner could help pragmatic opposition candidates who suffered under his withering attacks. One of these is Julio Cobos, Mrs. Kirchner's vice president, who broke with the Kirchners two years ago after siding with the farmers in the dispute over raising grain-export taxes. Another politician with his eyes on the presidency is Mauricio Macri, the conservative mayor of Buenos Aires.

Mr. Scioli, Mr. Cobos and Mr. Macri couldn't be reached for comment. The Kirchners earned reputations as tough customers while restructuring most of the country's bonds for around 30 cents on the dollar in 2005 and in a smaller round this year.

But controversial policy decisions undermined investor confidence. For example, many investment bank economists believe Argentina began rigging its inflation numbers. Argentina says its inflation rate is around 11%, about half what many international economists say it is.

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